December 22, 2010

 

Latvia's dairy prices may grow 3-15% in early 2011

 

 

Retail prices for dairy products in Latvia will grow 3-15% in January next year, according to representatives of leading retailers.

 

Agnese Upite-Upeniece, a representative of Palink, which operates Iki and Cento retail chains in Latvia, said that several Latvian dairy companies had already notified retailers about their plans to raise prices for their products at the beginning of 2011.

 

Rigas Piena Kombinats dairy is going to increase prices for its products by 5-15% in January, Rigas Piensaimnieks has planned a 3-11% growth of prices and Tukuma Piens intends to raise prices by 15-20%, the Palink representative said.

 

She said that several other food producers have informed Palink about their intention to raise prices of their products at the beginning of next year, but the retailer is holding talks with all the suppliers planning a price rise to make sure that they have valid arguments for the move and maybe to suggest other solutions as the price hikes would definitely affect the buying ability of consumers.

 

Ivars Andins, a spokesman for MaximaLatvija retailer, also said that growth of dairy product prices was expected next year. "Three large Latvian dairy companies have already announced a price rise by 3-15% for their products," he said.

 

"One producer intends to raise prices by 10% on average, the second wants to increase prices by 8-12% depending on the products and the third has said that prices will grow by 3-15%," the Maxima Latvija representative said.

 

He said that the prices for dairy products had already increased by 15% on average this year. "Producers say that milk purchase price has increased considerably and prices have grown also on the export markets therefore they have to raise their prices accordingly," Andins said.

 

Janis Solks, the board chairman of the Latvian Central Union of Dairies (LPCS), told BNS that "dairy product prices will grow objectively and inevitably next year". He also expects a 15% rise of prices from January 2011.

 

"The Latvian producers are forced to raise prices because milk purchase prices are high and increase of various production costs is expected next year along with higher taxes," he added.

 

Solks said that the milk purchase price in Latvia kept growing because of instability of the European milk prices. If the milk purchase prices in Europe stabilised, the price growth for dairy products in Latvia would discontinue.

 

The dairy industry association leader said that, although milk purchases were on the similar level, dairy products in other countries were cheaper than in Latvia because of lower production costs and taxes. "In Finland, Poland and other countries VAT on dairy products does not exceed 7% - how are we supposed to compete with them," Solks said, referring to the decision to raise VAT in Latvia to 22% next year.

 

Most of the dairy companies in Latvia would close the year 2010 with a loss as they had been unable to raise their prices in good time because of low buying ability by population, he said.

 

The average milk purchase price in Latvia in November 2010 rose 23% on-year.